Friday, November 15, 2013

DVY Weekly Chart Overbot Rising Wedge Negative Divergence Price Extended Dividend Stock Bubble Peaking Future Fed Chair Yellen Does Not See Any Asset Bubbles

In the most surprising testimony yesterday, the future Fed Chair Yellen says she does not see any asset bubbles. It is not too surprising since the Fed has always been incapable of seeing asset bubbles in the past, perhaps because they create the bubbles. Future Chair Yellen may want to make an eye appointment since the tint on her rose-colored glasses must be far too dark. Simply bring up a chart of DVY or SDY to highlight the ongoing Dividend Stock Bubble. For DVY, a move from 22 to 71, +223%, in only 4-1/2 years time, does not constitute a bubble in Yellen's eyes. The move is a 3-bagger thanks to the Fed's easy money policies with Chairman Bernanke printing money all night long and dropping the cash from helicopters. Yellen is channeling Sargent Schultz from Hogan's Heroes as she comments on asset bubbles saying, "I see nothing!"

The blue rising wedge pattern is long in the tooth; the drops out of rising wedges can be quite dramatic. The red lines show the negative divergence firmly in place over the last 3 quarters. The bulls are squeezing out some further juice in the very near-term, the last couple weeks, so a further sideways jog move is definitely in play, but the end appears near. Folks are running into divvy stocks because they think any stock market down turn will be mild and they will at least sit back and receive divvy's. These folks will all likely get crushed moving forward since everything will drop once the markets roll over. Once a stock pulls back -3 or -5% or more, that wipes out any divvy fun. The pink dots show the price extension above the moving averages requiring a mean reversion (lower prices). Note the May 2010 flash crash print.

If you see pending Fed Chair Yellen cruising the streets in her snazzy Columbo-style trench coat, be sure and ask her if the rose-colored glasses have been corrected, or not. The dividend stock bubble is prime for popping at any time moving forward. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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